U.S. Federal Reserve Requests Comment On Proposal To Enhance The Transparency And Accountability Of Annual Stress Tests And Proposed Scenarios For 2026 Stress Tests

Federal Reserve requests comment on proposal to enhance the transparency and accountability of annual stress tests and proposed scenarios for 2026 stress tests

On October 24, 2025, the Federal Reserve Board of Governors (Board) requested comments on a proposal to increase the transparency and accountability of its annual stress test models and framework.¹ This fulfills a 2024 commitment the Board made to unveil its models and framework after several business groups sued the Board, claiming the opacity of the framework violated the Administrative Procedure Act (APA). The proposal seeks comments on the Board's stress modeling framework and the proposed disclosure process. The Board approved the proposals by a vote of 6 to 1, with former Vice Chair for Supervision, Governor Michael Barr, dissenting.

The Board also requested comments on the proposed scenarios for the Board's 2026 supervisory stress tests.² Once finalized, these revised requirements will apply to "large financial institutions" as defined by the Board: U.S. bank holding companies, covered savings and loan holding companies, and intermediate holding companies of foreign banking organizations with $100 billion or more in assets.³

Background and Proposed Changes to Enhance Transparency and Accountability:

In the U.S., stress tests of large financial institutions are designed to ensure that those institutions have sufficient capital to absorb losses and continue lending to households and businesses, even during a recession or periods of financial volatility. Stress testing involves forward-looking scenarios with estimated measures of changed asset prices, interest rates, and variables for different countries, as well as internal models used by the Board to evaluate how well institutions respond to the tests.⁴ Since 2009 and as required by the Dodd-Frank Act, the Board, through its designed adverse shock scenarios and modeling, tests how regulated institutions demonstrate their resilience.⁵ The Board uses the results of the stress tests, in part, to set capital requirements.⁶

To enhance transparency and accountability, the Board has proposed several changes to the stress test framework.

1. Publish comprehensive model documentation by May 15 of the year in which the stress test is performed. If the Board seeks to implement a material model change, prior to May 15, the Board would request comments on the proposed change, consider and respond to public feedback, and publish its final decision by May 15.⁷
2. Publish the proposed scenarios by October 15 of the calendar year prior to the stress test for at least a 30-day comment period, allowing for sufficient time to respond to comments and finalize the scenarios within the current window for publishing final scenarios by February 15 in each annual stress test cycle.⁸
3. Shift the "jump-off date," the date as of which the adverse scenarios are applied, for supervisory and company-run stress tests from December 31 to September 30 to accommodate the proposed public comment process.⁹
4. Amend the Board's Stress Testing Policy Statement to clarify that the Federal Reserve would generally disclose information directly to a firm about the firm's supervisory stress test results that is not available to the broader public, so long as the Board discloses similar information to the other firms participating in a given stress test cycle. Under this proposal, the Stress Testing Policy Statement would also be amended to state that, during model development, the Board would invite, evaluate, and respond to substantive public input on the stress test models.¹⁰

The Board's proposed changes respond to concerns raised by industry advocates who have argued that the Board's stress tests establish capital requirements and therefore should be subject to a public notice and comment period, as required by the APA.¹¹ Although the Governors of the Board, and the OCC Comptroller¹², by and large agree with the need for more transparency, that view is not unanimous. Former Vice Chair for Supervision Governor Michael Barr has consistently commented that more transparency, and providing more insight into the Board's models and framework, "is the equivalent of handing out the questions to the test in advance," which "would fundamentally undermine the rigor of the test."¹³ He has also stated that publishing, and relying on published models, reduces the Board's ability to dynamically update its testing. Massachusetts Senator Elizabeth Warren, Ranking Member of U.S. Senate Committee on Banking, Housing, and Urban Affairs echoed Governor Barr, stating "The Fed sharing its methodologies with Wall Street banks means the banks will know exactly how to game the tests so they're guaranteed to pass with flying colors, and we won't know if they can withstand economic turmoil until it's too late."¹⁴

Comments on the 2026 scenarios are due by December 1, 2025, and comments on the proposal enhancing model and scenario transparency are due by January 22, 2026.

Footnotes

1. Board of Governors of the Federal Reserve System, October 24, 2025 Press Release, available at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20251024a.htm.

2 Id.

3 12 CFR § 225.8; 12 CFR § 238.170; see also The Federal Reserve Board of Governors Proposed 2026 Stress Test Scenarios Preface, available at https://www.federalreserve.gov/aboutthefed/boardmeetings/2026-proposed-supervisory-stress-test-scenarios-20251024.pdf.

4 Id. at pg. 3.

5 12 U.S.C. § 5365(i)

6 The Federal Reserve Board of Governors Proposed 2026 Stress Test Scenarios Preface, available at https://www.federalreserve.gov/aboutthefed/boardmeetings/2026-proposed-supervisory-stress-test-scenarios-20251024.pdf.

7 Notice of Proposed Rulemaking, Enhanced Transparency and Public Accountability of the Supervisory Stress Test Models and Scenarios; Modifications to the Capital Planning and Stress Capital Buffer Requirement Rule, Enhanced Prudential Standards Rule, and Regulation LL (Enhanced Transparency and Public Accountability Notice), p. 42-43, available at https://www.federalreserve.gov/aboutthefed/boardmeetings/enhanced-transparency-and-public-accountability-proposal-frn.pdf.; see also October 17, 2025 Board of Governors Staff Memorandum re: Proposals to enhance the transparency and public accountability of the Board's stress testing framework, pg. 2, available at: https://www.federalreserve.gov/aboutthefed/boardmeetings/stress-tests-transparency-memo-20251024.pdf.

8 Enhanced Transparency and Public Accountability Notice, p. 51.

9 Enhanced Transparency and Public Accountability Notice, p. 57-58.

10 Enhanced Transparency and Public Accountability Notice, p. 55-56.

11 Complaint, Bank Pol'y Instit. et al. v. Bd. of Governors of the Fed. Rsrv. Sys., No. 2:24-cv-04300-ALM-CMV (S.D. Ohio, Dec. 24, 2024), available at: https://bpi.com/wp-content/uploads/2024/12/BPI-OHChamber-OHBankers-ABA-Chamber-Stress-Testing-Complaint-2024.12.24.pdf. After the Board officially announced the proposals, the Bank Policy Institute and the American Banker's Association issued a statement supporting the increased transparency. See October 24, 2025 Bank Policy Institute Press Release, available at: https://bpi.com/federal-reserve-lifts-veil-on-stress-test-models/.

12 October 27, 2025 Office of the Comptroller of the Currency News Release 2025-105, available at: https://occ.gov/news-issuances/news-releases/2025/nr-occ-2025-105.html.

13 September 25, 2025 Remarks by Governor Michael S. Barr, Preserving the Dynamism and Credibility of Stress Testing, available at: https://www.federalreserve.gov/newsevents/speech/barr20250925a.htm.

14 October 24, 2025 Statement from Senator Warren on the Fed's New Stress Test Proposal, available at: https://www.banking.senate.gov/newsroom/minority/statement-from-senator-warren-on-the-feds-new-stress-test-proposal.

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